Exits – Candover sells Brannigans

Candover has sold Brannigans Bars to a Phildrew Ventures-backed newco called Mustard Entertainment Restaurants. The deal is structured as a management buy-in. The consideration was GBP67 million (EURO100.5 million), although total funding on the transaction is around GBP80 million. Of that figure, GBP48 million is debt – both working capital and capital expenditure – and GBP32 million is in equity from Phildrew Ventures. The deal is structured so that Phildrew Ventures holds 80 per cent of the equity and the management team 20 per cent. Phildrew Ventures is working with a management team led by Stephen Evans. Evans has been working with Phildrew Ventures on a number of potential MBI opportunities over recent months. Bank of Scotland provided the debt package.

Evans has his work cut out. Phildrew Ventures plans to roll out the Brannigans Bar franchise from the 21 sites bought to double that number with a three and a half year period. Five sites will be rolled out in the next six to nine months and an additional 15 in the two years thereafter.

Candover had disclosed in April this year that it was looking for a buyer for the bars, which it had acquired as part of a leveraged buyout transaction from First Leisure in November last year. Cavendish Corporate Finance managed the auction process on behalf of Candover and First Leisure Corp, and Arthur Andersen Corporate Finance advised Mustard on the acquisition. Competition in the auction was from both trade and financial buyers.

Candover retains ownership of the nightclub division that was bought alongside First Leisure Corp’s bar interests and has said that it will concentrate on developing the nightclub portfolio, which currently consists of 44 large capacity nightclubs spread throughout the UK. The sale of Brannigans Bar’s reduces First Leisure Corp’s debt burden and Candover says it will allow further investment in the business.

The November buyout involved Candover backing newco Whizalpha Ltd in a GBP210.5 million offer for First Leisure Corp’s nightclub and bars divisions. This buyout was structured with GBP82 million of equity provided by Candover, the Candover 1997 Fund and management, with total senior debt and mezzanine facilities of GBP180 million arranged by Lehman Brothers International (Europe).

In essence, what Candover bought was 40 large capacity nightclubs and 25 themed or late-night bars, including the Brannigans chain.

At the same time as this transaction First Leisure spun off the health and fitness side of the business to shareholders in a newly listed company called Esporta. The Esporta transaction was valued at GBP384.3 million based on Esporta’s closing share price on its first full day of trading – February 2, 2000. This completed First Leisure’s split which started in earnest with the sale of its family entertainment division to Moatdale Ltd for GBP111.5 million in August last year.